« Whitford Symposium | Main | Here's the Contempt Order. Really. »

IMF and Kazakhstan, Fixing Sovereign Debt in Unison

posted by Anna Gelpern

The IMF released its long-awaited paper on sovereign debt contract reform, advocating single-tier aggregated collective action (majority amendment) clauses and a clarification of the pari passu clause to preclude its future use to block payments on restrutured bonds, a la NML v. Argentina. An accessible summary of key points per IMF GC Sean Hagan is here. The recommendations were coordinated with ICMA (whose reform proposal is discussed here and here), as well as wealthy and emerging market governments.

Somewhat miraculously, Kazakhstan just issued a bond where it adopted the bulk of ICMA recommendations, which also puts it in line with the IMF's hot-off-the-press policy. The miracle is both in the issuer and in the timing. Kazakhstan's bond had been stop-and-go for some time (not the place one might expect experimentation). Moreover, the last time the IMF and its major shareholders advocated contract reform, it took YEARS for the first mover to emerge (Mexico). To be sure, first mover is no market shift, but a huge deal nonetheless.

I will have more on the whole subject of debt restructuring reform later, but for now, I just wonder why it was so hard the last time, and so not-nearly-as-hard this time. Is it that the market finally learned that CACs are an innocuous voting device, not the Trojan Horse of default? Is it that the Argentina mess has finally focused the minds? Is it that Kazakhstan balanced the new CACs with concessions to the creditors? Is it that none of it matters? Or that the relevant characters--government debtors, government creditors, market participants, lawyers, international organizations, and trade groups--have finally figured out how to work together?

Still thinking about the possibilities, but in all, indubitably a good thing.


The comments to this entry are closed.


Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.



  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless ([email protected]) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.